EU’s tariffs on Chinese EVs could slow progress on bloc’s green goals

Berlin, Germany — Forced to choose between its ambitious climate goals and a major loss of electric vehicle market share to China, the European Union opted to protect its carmakers. But analysts say the long-term effect on efforts to reduce greenhouse gases remains to be seen.

Provisional duties of up to 37.6% on Chinese-made EVs imposed by the EU earlier this month “might slow sales of EVs,” which are a key component of any plan to slow the rate of climate change, acknowledged Miranda Schreurs, professor at the Technical University of Munich, in an interview.

“It probably does have to do with concerns about the tariffs and also concerns about the [extent to which] Europe is really supporting the transition to EVs right now,” said Schreurs, who specializes in environment and climate policy, including energy transitions.

“That can have a negative impact if European consumers feel like the Green Deal is hurting them rather than helping them. … And many people are much more worried about inflation and their pockets … so there’s the question of what will the public accept?”

The EU imposed the new duties, which come on top of an existing 10% tariff, after accusing Beijing of offering “unfair subsidization” that threatened economic injury to Europe’s own electric vehicle makers. The bloc said China-made EVs were selling at prices 20% lower than those of their European counterparts.

Beijing retaliated last week with an anti-dumping probe into EU imports that singled out Danish, Dutch and Spanish pork firms.

Schreurs said the trade dispute reflects major changes in the global auto market based on growing awareness of the threat posed by climate change and the potential of electric vehicles to eliminate a major source of the gases that are heating the planet.

“China, which wasn’t a big international player in terms of automobile exports, has become the dominant player – the biggest player – in EV exports in the last several years,” she told VOA. “This is putting a lot of pressure on European manufacturers of automobiles.”

Boosted by government policies and subsidies, China’s BYD overtook Tesla to become the world’s top EV maker last year. Some projections say Chinese-made EVs could account for 15% to 25% of all such vehicles sold in the EU by next year.

Any slowdown in the sales of EVs will inevitably impact the continent’s so-called Green Deal, which aims to slash greenhouse gases in the transport sector, mainly by boosting the share of EVs. EU planning calls for emissions to be cut by 37.5% compared with 1990 levels by 2030, and for only zero-emission vehicles to be sold by 2035.

However, many analysts believe the tariffs will have only a modest effect on the rate of conversion to EVs, and Schreurs said a dampening of enthusiasm for EVs could prompt more people to switch to public transportation, which would do even more to cut emissions.

Wan-Hsin Liu, senior researcher at the Kiel Institute for the World Economy, told VOA the short-term price increase will be there, but “still far away from a price shock” that would deter consumers.

“Even due to these countervailing duties, Chinese [battery electric vehicle] producers will not just transfer the whole duty costs to consumers completely,” said Liu, whose research focuses on China and innovation.

Over the long term, she said, the price increase will still be manageable and other non-Chinese EV producers can make up for any reduction in sales from China.

Schreurs said China could also help itself by shifting more of its auto-making to Europe, where about 13.8 million people work in the EU automotive industry, including 3.5 million in direct and indirect manufacturing, data from the European Commission shows.

“If China is investing in Europe in a way that it’s creating jobs, it can also decrease tensions” with the EU, she said. “The support for [Chinese EVs] will be stronger both from the public and government officials.”

Several Chinese EV makers are moving in that direction. Chery Auto signed a joint venture with Spain’s EV Motors to open a manufacturing site in Catalonia, while BYD will build its first EV production base in Hungary.

Liu said a larger shift of that kind would not have to translate into fewer jobs in China, where officials have set a goal of reaching carbon neutrality by 2060.

“The market demand [for EVs] would only rise, so it doesn’t necessarily mean that [Chinese EV makers] build a factory in Europe and would then automatically close a factory in China,” she said. “These different kind of factories would serve different kinds of markets … so it does not mean green jobs in China will suffer.”

Schreur said both China and Europe need green jobs “and to do this in a way that also reduces the footprint tied to the manufacturing of cars.” Consequently, “perhaps it makes more sense that the prices of [China-made] cars are raised somewhat right now.”

The provisional tariffs remain subject to trade negotiations in November, and both Schreur and Liu believe the EU and China will be able to resolve some of their differences at that time. But Liu voiced some reservations.

“China currently perceives the EU’s investigation and decision on EVs and others as protectionist measures with the goal to protect solely the domestic industry,” she said. “China thinks that the responsibility for causing a potential trade war lies within the EU.”

In the end, she said, the outcome will depend on both sides’ willingness to compromise.